Will the Ethereum Merge put other cryptocurrencies at risk?
The upcoming Ethereum [ETH] Merge has created great anticipation, and all of the test runs have been successful. Grayscale drew attention to a possible area of concern that investors should consider, even though this suggests the Merge may be successful.
— Techmeme (@Techmeme) August 19, 2022
Grayscale has expressed concern about its potential impact on the Merge, especially concerning tokens that function natively on Ethereum. The bitcoin investment firm believes that the Merge might result in a split that could have unintended and negative consequences.
One of the concerns mentioned by Grayscale about the Merge is the prospect that stablecoins and tickets trapped in intelligent contracts may no longer be redeemable. Historically, hard forks on blockchain networks have resulted in the development of two different networks, each with its native currencies. As several ERC-20 tokens use the Ethereum network, it is likely, that a fork will also affect these tokens. The USDT stablecoin shows this.
The cryptocurrency investment firm acknowledges the prospect that token and stablecoin holders may succumb to panic and begin selling their assets. If this were to occur, a large amount of selling pressure would be produced.
These concerns seem legitimate, don’t they?
The argument given by Grayscale has some merit, given the outcomes of previous hard forks. In addition, it has been said that the Ethereum POW chain may continue to operate after the Merge, maybe in conjunction with the new network.
As this is the first time a network has migrated from one consensus to another, several unknowns exist. This kind of concern may assist in explaining why the total value of ETH held in DeFi has declined dramatically over the last six months.
There is a chance that many ETH investors have decided to move their coins in anticipation of Merge’s potential disruptions. During the same period, a considerable amount of ETH was also transferred into staking pools for the ETH 2.0 network. During the same timeframe, the amount of ETH flowing through ETH 2.0 staking facilities has increased substantially during the last six months. The data above proves that a substantial percentage of ETH holders have already taken precautions to protect their interests ahead of the Merge.
Then, what is ETH’s standing?
Even if Grayscale’s concerns are justified, those working on Ethereum have already considered and prepared for them. During the Merge, which will also function as a handoff, the data from the Proof-of-Work Ethereum blockchain will likely be transmitted. Consider that a parallel chain will always result in repetition. On the other hand, the strategy and actions to solve these challenges remain unknown.